Histone deacetylases (HDACs) are part of transcriptional corepressor complexes and play key roles in regulating chromatin structure. Three different classes of human HDACs have been defined based on their homology to HDACs found in Saccharomyces cerevisiae: RPD3 (class I), HDA1 (class II), and SIR2 (class III). Here we describe the identification and functional characterization of HDAC7, a new member of the human class II HDAC family. Although HDAC7 is localized mostly to the cell nucleus, it is also found in the cytoplasm, suggesting nucleocytoplasmic shuttling. The HDAC activity of HDAC7 maps to a carboxyl-terminal domain and is dependent on the interaction with the class I HDAC, HDAC3, in the cell nucleus. Cytoplasmic HDAC7 that is not bound to HDAC3 is enzymatically inactive. We provide evidence that the transcriptional corepressors SMRT and N-CoR could serve as critical mediators of HDAC7 activity by binding class II HDACs and HDAC3 by two distinct repressor domains. Different class II HDACs reside in the cell nucleus in stable and autonomous complexes with enzymatic activity, but the enzymatic activities associated with HDAC7 and HDAC4 rely on shared cofactors, including HDAC3 and SMRT/N-CoR.